Revolving Debt
An open line of credit, available to the consumer as needed. (examples: Credit card, Bank line of credit, and home equity line of credit)
Credit and repayment (open credit)
When credit will continue to be extended as long as the balance is below the maximum.
Credit and repayment (no fixed repayment schedule)
Other than minimum repayment schedule (interest applied + 2% of the principle)
Standard card
No "Extras" but lower rate
Balance transfer cards
Lower teaser rate
Rewards card
Rewards but carries a higher rate (Eg. air miles, cash back)
Premium card
Higher credit limits and additional perks, but carries a high rate and perhaps annual fee
Affinity card
Associated with charity or organization
Retail charge card
credit with particular store, which provides for delayed billing and perhaps discounts
Credit limit
-Maximum balance allowed
-includes card charges, accumulated finance charges and fees
-Any balance over credit limit may result in a penalty, an over limit fee and higher interest rate.
How is the card limit determined?
-Preset credit limit
-Linked to FICO Score
-Based on income, current debt level, credit history
Grace Period
-Amount of time before finance charges are applied, given no existing card balance
-typically 30 days for purchases, although varies
-Typically no grace period for cash advances or balance transfers
Unpaid or existing balance
Finance charges are applied once the grace period expires
Adjusted balance
Beginning ( end of previous month)-additional purchases feed+ card payments= adjusted balance
Fixed rate
Rate doesn't change unless given a notice in advance.
Variable Rate
-Base index+ rate "spread"
-can change based on economy
-Prime rate is the rate that major commercial banks charge their customers.
Prime rate + Additional percentage= Card rate
Fair Credit and Charge Card Disclosure Act of 1988
Requires financial institutions to disclose important credit card information
-interest rates
-grace periods
-all fees
Terms must be provided in writing, including for all "pre-approved" cards
Credit Card Accountability, Responsibility, and Disclosure Act of 2009
45-day advance notice on changes to existing fixed rate or fees or material changes to card rules